European stocks rallied Tuesday along with oil prices, while Wall Street ended lower as markets nervously eyed the impasse over Ukraine while awaiting a key Federal Reserve decision.

A day after suffering deep losses, Frankfurt, Paris and London all pushed higher, following a topsy-turvy session in New York on Monday when the Dow recovered more than 1,200 points to finish in positive territory.

But sentiment remained brittle on Tuesday.

"Notwithstanding yesterday's huge intraday reversal -- one of the largest ever for the Nasdaq -- the stock market isn't necessarily in a celebratory mood," Briefing.com analyst Patrick O'Hare said.

US stocks briefly rallied in the afternoon, but were unable to match Monday's pattern. Though the S&P 500 ended far above its session lows, it was still down 1.2 percent.

"Market volatility remains elevated as investors are still feeling jittery over a very tense Ukraine-Russia situation, a whole range of inflationary issues that include a potentially aggressive Fed and a global chip problem that just won't get any better," Oanda's Edward Moya said.

"Optimism remains that a massive correction is still unlikely to happen because the US growth story will likely remain intact this year, but Wall Street is not seeing many buyers emerge ahead of the Fed and as the conflict in Ukraine escalates."

The United States warned Moscow it faces damaging sanctions, including high-tech export curbs, as Russian combat troops near Ukraine launched new exercises.

Meanwhile, Fed officials kicked off a two-day policy meeting that is expected to produce more information on how Fed Chair Jerome Powell's recent focus on containing inflation will affect monetary policy.

The International Monetary Fund trimmed its world GDP forecast for 2022 to 4.4 percent, half a point lower than the October estimate as the Omicron variant of Covid-19 weighs on activity.

And amid ongoing global supply chain snags, analysts cited a Commerce Department report warning that US firms have an average of less than five days worth of semiconductors on hand.

In other markets, oil prices advanced amid worries the Ukraine impasse could hit production. either because of sanctions that Russia or an outage on key petroleum infrastructure.

New York - Dow: DOWN 0.2 percent at 34,297.73 (close)

Traders will be hanging on every word by Federal Reserve boss Jerome Powell when he holds a new conference after the bank's policy meeting this week Traders will be hanging on every word by Federal Reserve boss Jerome Powell when he holds a new conference after the bank's policy meeting this week Photo: GETTY IMAGES NORTH AMERICA via AFP / POOL

New York - S&P 500: DOWN 1.2 percent at 4,356.45 (close)

New York - Nasdaq: DOWN 2.3 percent at 13,539.29 (close)

London - FTSE 100: UP 1.0 percent at 7,371.46 (close)

Paris - CAC 40: UP 0.7 percent at 6,837.96 (close)

Frankfurt - DAX: UP 0.8 percent at 15,123.87 (close)

EURO STOXX 50: UP 0.6 percent at 4,078.26 (close)

Tokyo - Nikkei 225: DOWN 1.7 percent at 27,131.34 (close)

Hong Kong - Hang Seng Index: DOWN 1.7 percent at 24,243.61 (close)

Shanghai - Composite: DOWN 2.6 percent at 3,433.06 (close)

Euro/dollar: DOWN at $1.1305 from $1.1326 late Monday

Pound/dollar: UP at $1.3507 from $1.3488

Euro/pound: DOWN at 83.66 pence from 83.97 pence

Dollar/yen: DOWN at 113.87 yen from 113.95 yen

Brent North Sea crude: UP 2.2 percent at $88.20 per barrel

West Texas Intermediate: UP 2.7 percent at $85.60 per barrel